UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ X ]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2016

[   ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to         .

Commission file number 1-9030

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.

Large accelerated filer [  ]

Accelerated filer [  ]

Non-accelerated filer [  ]

Smaller reporting company [ X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [ X ]

Number of shares outstanding of issuer's Common Stock as of February 10, 2017: 12,644,452

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ALTEX INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

 

		December 31,				September 30,
		2016				2016
Assets
Current assets
Cash and cash equivalents		$	2,444,000			$	2,472,000
Accounts receivable			4,000				3,000
Other			12,000				16,000
Total current assets			2,460,000				2,491,000
Property and equipment, at cost
Proved oil and gas properties (successful efforts method)			334,000				334,000
Other			17,000				17,000
Total property and equipment, at cost			351,000				351,000
Less accumulated depreciation, depletion, and amortization			(230,000	)			(224,000	)
Net property and equipment			121,000				127,000
Other assets
Total assets			2,581,000				2,618,000
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable			5,000				7,000
Other accrued expenses			1,076,000				1,080,000
Total current liabilities			1,081,000				1,087,000
Commitments and Contingencies			-				-
Stockholders' equity
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued			-				-
Common stock, $.01 par value. Authorized 50,000,000 shares; issued, 12,734,452; outstanding 12,644,452, at December 31, 2016			127,000				127,000
Additional paid-in capital			13,837,000				13,837,000
Accumulated deficit			(12,456,000	)			(12,433,000	)
Treasury stock, at cost, 90,000 shares			(8,000	)			-
Total stockholders' equity			1,500,000				1,531,000
Total liabilities and stockholders' equity		$	2,581,000			$	2,618,000

 

See notes to unaudited condensed consolidated financial statements

 

ALTEX INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

		Three Months Ended
		December 31,
		2016				2015
Revenue
Oil and gas sales		$	21,000			$	5,000
Other income			-
Total revenue			21,000				5,000
Costs and expenses
Lease operating			-				-
Production taxes			1,000				-
General and administrative			42,000				93,000
Depreciation, depletion, and amortization			6,000				6,000
Total costs and expenses			49,000				99,000
Other income (expense)
Interest income			5,000				4,000
Net loss		$	(23,000	)		$	(90,000	)
Loss per share		$	(0.00	)		$	(0.01	)
Weighted average shares outstanding			12,688,148				12,923,232

 

See notes to unaudited condensed consolidated financial statements

 

 

 

ALTEX INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

		Three months ended
		December 31,
		2016				2015
Cash flows used in operating activities
Net loss		$	(23,000	)		$	(90,000	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation, depletion, and amortization			6,000				6,000
(Increase) decrease in accounts receivable			(1,000	)			3,000
Decrease in other current assets			4,000				5,000
Decrease in accounts payable			(2,000	)			(6,000	)
Increase (decrease) in other accrued expenses			(4,000	)			55,000
Net cash used in operating activities			(20,000	)			(27,000	)
Cash flows from financing activities
Acquisition of treasury stock			(8,000	)			-
Net cash used in financing activities			(8,000	)			-
Net decrease in cash and cash equivalents			(28,000	)			(27,000	)
Cash and cash equivalents at beginning of period			2,472,000				2,605,000
Cash and cash equivalents at end of period		$	2,444,000			$	2,578,000

 

See notes to unaudited condensed consolidated financial statements

 

 

 

ALTEX INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 ‑ Basis of Presentation. The accompanying Condensed Consolidated Balance Sheet as of September 30, 2016, which was derived from audited financial statements, and the unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the accompanying unaudited, consolidated, condensed financial statements contain all adjustments necessary to present fairly the financial position of the Company as of December 31, 2016, and the cash flows and results of operations for the three months then ended. Such adjustments consisted only of normal recurring items. The results of operations for the three months ended December 31 are not necessarily indicative of the results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements contained in the Company's 2016 Annual Report on Form 10‑K, and it is suggested that these condensed consolidated financial statements be read in conjunction therewith.

Note 2 – Acquisition of Treasury Shares. During the three months ended December 31, 2016, the Company acquired 90,000 shares of its Common Stock for $8,000.

Statements that are not historical facts contained in this Form 10‑Q are forward‑looking statements that involve risks and uncertainties that could cause actual results to differ from projected results. Factors that could cause actual results to differ materially include, among others: general economic conditions; movements in interest rates; the market price of oil and natural gas; the risks associated with exploration and production of oil and gas; the Company's ability, or the ability of its operating subsidiary, Altex Oil Corporation ("AOC"), to find, acquire, market, develop, and produce new properties; operating hazards attendant to the oil and natural gas business; uncertainties in the estimation of proved reserves and in the projection of future rates of production and timing of development expenditures; the strength and financial resources of the Company's competitors; the Company's ability and AOC's ability to find and retain skilled personnel; climatic conditions; availability and cost of material and equipment; delays in anticipated start‑up dates; environmental risks; the results of financing efforts; and other uncertainties detailed elsewhere herein and in the Company's filings with the Securities and Exchange Commission.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation.

Financial Condition

Cash balances decreased $28,000 in the three months ended December 31, 2016 ("Q1FY17"). At December 31, 2016, $1,073,000 of other accrued expenses is accrued but unpaid salary (and related accrued payroll tax liability) due to the Company's president that the Company's president has elected to defer. The Company is likely to experience negative cash flow from operations unless and until the Company invests in interests in producing oil and gas wells or in another venture that produces cash flow from operations. With the exception of capital expenditures related to production acquisitions or drilling or recompletion activities or an investment in another venture that produces cash flow from operations, none of which are currently planned, the cash flows that could result from such acquisitions, activities, or investments, the possibility of a change in the interest rates the Company realizes on cash balances, and changes in the price of oil and natural gas, the Company knows of no other trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the Company's liquidity increasing or decreasing in any material way.

Except for cash generated by the operation of the Company's producing oil and gas properties, asset sales, and interest income, the Company has no internal or external sources of liquidity other than its working capital. At February 10, 2017, the Company had no material commitments for capital expenditures.

The Company regularly assesses its exposure to environmental liability and reclamation, restoration, and dismantlement expense ("RR&D"). The Company does not believe that it currently has any material exposure to environmental liability or to RR&D, net of salvage value, although this cannot be assured.

Results of Operations

Oil and gas sales increased from $5,000 in the three months ended December 31, 2015, ("Q1FY16") to $21,000 in Q1FY17. $11,000 of the increase resulted from sales from a newly drilled well in which the Company has an interest, and the remaining $5,000 of the increase resulted principally from higher realized prices. Sales from the newly drilled well are levelling off, and the Company expects future monthly sales from the newly drilled well to be materially less than those realized in Q1FY17. General and administrative expense decreased from $93,000 in Q1FY16 to $42,000 in Q1FY17 principally because of a reduction in salary expense. The decline in salary expense resulted from a new employment agreement with the Company's president which was effective October 1, 2016, and which reduced salary expense related to the Company's president from $56,000 in Q1FY16 to $1,000 in Q1FY17. At the current level of cash balances and at current interest rates, the Company's revenue is unlikely to exceed its expenses. Unless and until the Company invests a substantial portion of its cash balances in interests in producing oil and gas wells or in one or more other ventures that produce revenue and net income, the Company is likely to experience net losses. With the exception of unanticipated RR&D, unanticipated environmental expense, and possible changes in interest rates and oil and gas prices, the Company is not aware of any other known trends or uncertainties that have had or that the Company reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.

Liquidity and Capital Resources

Operating Activities. The Company used $27,000 and $20,000 cash in operating activities in Q1FY16 and Q1FY17, respectively.

Financing Activities. The Company acquired 90,000 shares of its common stock for $8,000 during Q1FY17.

Item 4. Controls and Procedures.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures which, by their nature, can provide only reasonable assurance regarding management's control objectives.

As of the end of the period covered by the report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a‑14. Based upon the foregoing, the Company's Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiary) required to be included in the Company's Exchange Act reports. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

Changes in Internal Control Over Financial Reporting

During the period covered by this Report there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The Company has no publicly announced plan or program for the purchase of shares.

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALTEX INDUSTRIES, INC.